How to Negotiate "Owner Will Carry" Financing

It may be easier to sell and accept "owner will carry" financing than try to continue to balance your mortgage payments.

With job losses, pay cuts and other financial challenges after the recent economic crisis, buyers are having a hard time getting mortgage financing. As a result, "owner will carry" financing, also known as "seller financing," is surfacing more often now as the latest strategy for buyers in overcoming stringent bank guidelines; but it works for sellers as well. Sellers are having a hard time finding homebuyers who meet the bank's mortgage financing guidelines. By carrying the note themselves, sellers can work out their own terms. With benefits to both parties, "owner will carry" financing can be negotiated.

Things You'll Need

• Calculator
• Current interest rates
• Budget
• Down payment

Instructions

1. Do your own research to find available properties with "owner will carry" financing. Do not expect that Realtors will have many properties for your consideration. Estimate the purchase price, recognizing that you may end up paying more because of the limited number of properties on the market that have "owner will carry" financing. Calculate how much you are able to put down, as well as the interest and monthly payments that are affordable.

2. Negotiate the down payment, which you should be able to get lower than bank requirements. Decide on your bottom line for the down payment. If it is 10 percent, suggest 5 percent instead of the required 20 percent of a traditional down payment and negotiate to your bottom line. Negotiate seller financing for the balance. Emphasize that other buyers may have a hard time obtaining bank financing and that your down payment is available.

3. Negotiate terms such as the length of the mortgage. Discuss better terms with a balloon payment option, paying off the full amount at an agreed upon term. Recognize that the seller becomes the bank and can even agree to an interest rate. Suggest an interest rate for manageable payments. Take all the numbers into consideration to creatively negotiate a mutually agreeable purchase price.

Tips & Warnings

• Many buyers are in a predicament of not qualifying with a bank, which is their reason for turning to "owner will carry" financing. The benefit to the buyer is that this type of financing generally lasts between three and five years, which will allow the buyer to clean up his credit and rebuild a decent credit score.

References

• Real-Estate-Logistics.com: Owner Will Carry
• How to Buy Owner Financed Homes: How Does Owner Seller Carry Back Work?
• Active Rain: Owner Will Carry
• Simon Volkov: Owner Will Carry

Resources

• "Make Money in Abandoned Properties"; Chantal Howell-Carey and Bill Carey: 2006